This section will try and answer and the question of is growing inequality unable to be avoided. “Mainstream economists’ starting assumption, rooted in the Smithian tradeoff between efficiency and equity was that, in the other direction of causation, inequality resulting for example from increased security of property rights, would enhance growth by encouraging investment and savings and creating a necessary incentive for individuals to work hard. (Birdsall, 2007)” To answer this I first did some research to see what other economist and articles had to say on the matter. Arthur Okun argued in 1975 that pursuing equality will overall reduce efficiency in his book Equality and Efficiency: The Big Tradeoff. Arthur Okun is an economist from Yale …show more content…
University and he said that “not only can more equal distribution of incomes reduce incentives to work and invest” (Berg & Ostry, 2011). In early studies if total equality leads to less work and investment in an economy the efficiency will suffer.
But as more research was done you can begin to see opposing arguments that support that equality is approving along with efficiency and economic growth. According to Berg and Ostry (2011) in a more recent study said that “we discovered that when growth is looked at over the long term, the trade-off between efficiency and equality may not exist. In fact equality appears to be an important ingredient in promoting and sustaining growth.” Countries that work on improving equality can also see a great increase in efficiency and long term growth. Now if one of these theories holds true then we should start to see similar trends for different countries. Costa Rica high productivity is in part due to the export-driven sector of its economy. But according to Zach Dyer in his article Costa Rica's rising inequality outpaces other Latin American countries, the money will not trickle down to the middle and lower classes anytime in the near future. Zach Dyer says that the success was concentrated to a few of the few elite groups in Costa Rica. This Success and growth in GDP per capita is just widening the inequality gap. Costa Rica has had a 4.7 percent average growth rate over the last decade which is about 2 percent higher than the rest of Latin America (The World …show more content…
Bank, 2014c). In 2012 Costa Rica had a GDP per capita of 9,443 which are higher than 4,115 which it had in 2002 according to the data collected from The World Bank. But to see the whole picture we need to compare that increase to what the Gini index was during those years.
During 2012 Costa Rica had a Gini index of 48.6 percent which indicated that it lies between perfect equality and perfect inequality. In 2002 Costa Rica had a Gini index of 50.9 percent, as you can see during the 10 year spanned Costa Rica had a minimal drop of 2.3 percent. If there was a correlation between economic growth and equality I would suspect to see a little bigger jump to equality in the Gini index because Costa Rica has seen greater Efficiency and GDP growth during the last decade. In my opinion the data correlation for Costa Rica is straighten Zach Dyers argument the success is only truly helping out the upper class in the Costa Rican economy. When comparing the Gini index and GDP per capita for Costa Rica the results were unclear. Ukraine is located in a different geographical area so I will compare its data to see if we can get a clearer picture of economic growth and inequality and see if it is unable to be avoided. In 2010 Ukraine had a GDP per capita of 2,974 which are higher than 879 which it had in 2002 according to the data collected from The World Bank. But again to see the whole picture the GDP per capita and Gini Index need to be
compared side by side. During 2010 Ukraine had a Gini index of 24.8 percent which indicated that it lies more towards having more equality than inequality in the society. In 2002 Ukraine had a Gini index of 29.1 percent. How can it be that Ukraine having minimal economic growth has such a low Gini index? According to Lisa Smith wrote in her article The Gini Index: Measuring Income Distribution; “while low numbers represent greater equality, low numbers aren't always a perfect indicator of economic health.” Some economies have a low Gini index percent because they have relatively equal distribution of poverty. This is a major downfall when using the results of the Gini Index. Some countries like North Korea have a high rate of poverty from being ruled by a dictator. North Korea does not have equality but from just looking at the numbers you would say they do.
Jared Diamond makes a great and compelling argument about how inequality across the entire globe originated. The main components that were agreeing with this argument were guns germs and steel. Guns meaning the advancement in weaponry, military warfare and military sophistication. Germs meaning the harmful disease and other foul illness that wiped out humans throughout History. Then the third and final point steel, which was about the advancement in societies and the complex sophistication with their technology, which lead to building great architecture and devices that were completely impactful.
David J Lynch says that, “ [s]ocieties that manage a narrower gap between rich and poor enjoy longer economic expansions”, however, in the United States the gap between the have and have-nots has widened (source C). “This country is just getting worse and worse and worse … and that is not a recipe for stable growth” (source C). If we do not do something soon our capitalist country will fall. In order for the income inequality gap to lessen to create a more stable economy the government must invest in education and unionize workers and not provide higher taxation for the top one percent.
The distribution of wealth by country is an amazing thing to look at (see table 3). The United States comes clearly on top with 41.6% of the wealth across the world, with the next closest being China at 10%. This shows that there is plenty of wealth to go around in the United States; we just don’t equally distribute it. The Gini Coefficient is the best way the world economy can represent the income distribution of a nation’s citizens. The United States ranks well below any other first world country (See table 2) This is an embarrassment to our country. We are a wealthy and successful country, yet we have a bigger gap between the wealthy and poor than any other country that compares to
The highest earning fifth of U.S. families earned 59.1% of all income, while the richest earned 88.9% of all wealth. A big gap between the rich and poor is often associated with low social mobility, which contradicts the American ideal of equal opportunity. Levels of income inequality are higher than they have been in almost a century, the top one percent has a share of the national income of over 20 percent (Wilhelm). There are a variety of factors that influence income inequality, a few of which will be discussed in this paper. Rising income inequality is caused by differences in life expectancy, rapidly increases in the incomes of the top 5 percent, social trends, and shifts in the global economy.
There are many people that think there is economic and wealth equality in the United States , but with all the statistics I provided it can be clearly seen that inequality in America is a serious issue , and it's getting worse with every year. I do believe that there should be some income inequality because that drives people to succeed , but I also believe that too much inequality limits a lot of people from achieving financial success.
Wealth inequality is a real issue that needs to be fixed. The imbalanced growth of the upper class compared to the middle class is a danger to American society as a whole. The rich becoming richer while the middle class remains the same leads to a power imbalance, with the rich using their money to run the country the way they see fit while the middle class speaks to ears that do not listen. The issue of wealth inequality needs to be fixed by raising taxes on the rich.
First we must understand how inequality started. Obviously like I mentioned before there will always be inequalities such as intelligence and looks no matter what. Ignoring that, lets understand how inequality came to be. As soon as a organization is formed is when inequality takes place. In an organization there are different roles that have different powers and ultimately there is some sort of ranking between people in this organization. Understanding this will help you understand why the world is the way it is now. It helps you understand why there is different economic classes and why some people make more money than others. If you ask any sociologist how did inequality emerge in the first place they will tell you it’s because of social conflict and the division of labor. The division of labor is basically referring to when different people take part in a task to improve efficiency. An easy example of this would be a factory or any job you can find. Once positions of power are crated then inequality is formed. Knowing that general idea will help make sense of why inequality is here and why it is very difficult to get rid
Income inequality not only harms us fiscally, but also affects our mental and physical wellbeing; therefore, it is important to identify the right ways to control wealth distribution among people.
Recently, studies have shown that income inequality has many connections that have caused the gap in the United States. According to the research I found, income inequality is connected to corruption, trade, wages of workers, and education. The world income inequality had declined since the twentieth century according to the studies found (Clark). Corruption falls increasing on low income individuals more than higher income individuals. Additionally, the trade theory suggests that the free trade might have level up the income inequality higher within countries by the different patterns of wages and demand for workers who are skilled and unskilled (Silva and Leichenko). Moreover, the education of wealthier people has it easier because the learning efforts of education are unbalanced. Besides, income inequality in the United States is hurting our economy due to the all the issues of corruption, trade, wages, and education. Suggested by Robert H. Frank article called “Income Inequality: Too Big to Ignore,” the income inequality is bad for our economy (Frank).
First I will examine the divisions of wealth in the country. To begin with Panama has been stated by the world bank to be among the most unequal countries in the world as estimated by the world bank and has been estimated to have thirty-seven percent of the population in poverty with about nineteen percent of the total population living in extreme poverty. This division also is much more highly concentrated in the country side where in proveniences such as Panama and Colon have up to sixty-f...
Income inequality is not necessarily harmful to our society because if the rich is getting richer they are able to invest more of their money to create business which will lead to more employment of people in the lower and middle class. A topic we also discussed in class was about the income mobility. The idea behind income mobility is that the poor does not always remain poor. People who were poor in the past are usually not poor later on in the future because the size of the economic pie increase too. People may think that the rise of income inequality is bad, but I do not really think it is as bad as many make it out to be. A solution should be put in place for a better distribution of the wealth, but I do not believe it should really be a concern because it seems to be something that will always exist. Even though income inequality exist or even if it is rising, people are better off today than they were before. The middle and poor class as discussed in class are getting a smaller peace of the pie, but it is larger that before, and with income mobility, the poor keep pushing forward regardless of the rich getting richer. Income inequality is a debated subjected, and I believe it will always be a debated subject. However in this class, so far, I have leaned that income inequality is not such as a bad thing as people make it sound. Income inequality has two side
...ment, income inequality will exist due to the rise of some economically successful people and the further development of factors that push people into poverty. Although it may not seem fair that there are rich people blowing money on impractical and meaningless things while people live in poverty, it’s a reality that the United States has experienced for centuries.
Not all countries have developed at the same rate and globally there is an unequal distribution of wealth. Most economically developed countries (MEDCs) cover only 20% of the world’s population but have 80% of the world’s wealth, and are located in the northern hemisphere and include countries like USA, Canada, Britain, Germany, Japan etc. the southern hemisphere with African countries, for example.
The article “Divided We Stand: Why Inequality Keeps Rising”, does not fit with my perspective, rather it follows a more conservative view. The article highlights the gap between rich and poor explaining it as a natural power structure, along with the large conservative view that equality comes after ones self-interest. The cause of much of this economic inequality is due to the factors related to globalization, technology, employment opportunities, and family structure (OECD, 2011). The increasing inequality with the globalization factor is present in wage inequality issues, regulations changes, along with numerous job opportunities available only to those who possess the required technological skills that come with newly developed jobs (OECD, 2011). Overall household incomes are and have always been influenced by the constantly evolving family structures. The marriage of similar range incomers is another reason for the inequality gap between the rich and poor (OECD, 2011). This article doesn't match my opin...
No matter how many struggles are going on around the world about equality, it will never seize to exist completely. There will always be someone who has more power and more benefits in life than another person. Take the workplace for instance, there always has to be someone in charge, and the higher you are in terms of titles, the more advantages you get and the more that people will listen to you. The theory of Marxism explains it all. People may say they work with a team, but at the end of the day, there is constantly someone who has more of a say, and the final say as well. The higher power gets all the advantages, while those in a lower status only think they do.